Old Age and Survivor's Insurance

Rescinded 1984

SSR 68-34: Section 218(s). - State and Local
Coverage—Commissioner's Ruling on State's Request for
Review—Montana—Ferry Operators for Chouteau County

20 CFR 404.1270-404.1274

SSR 68-34

Pursuant to the State's request for review under section 218(s) of the
Social Security Act, the Commissioner affirmed assessments made on the
basis that services performed subsequent to March 1962 by ferry operators
for Chouteau County were performed as employees of the county and were
covered under section 218 of the Social Security Act and the Montana
agreement for coverage of State and local employees.

The State of Montana timely requested a review pursuant to section 218(s)
of the Administration's assessments of contributions due. The Secretary
has delegated to the Commissioner of Social Security authority to make
reviews and findings and to give notice of his findings as required by
section 218(s). The assessments made were based on the Administration's
determination that services of ferry boat operators for Chouteau County
for periods after March 1962 were performed in an employment relationship
and covered under the State's coverage agreement. The State is of the view
that these individuals performed their services subsequent to March 1962
as independent contractors.

The facts in this matter are that services of employees of Chouteau
County in positions under the Public Employees' Retirmeent System of
Montana were covered effective July 1, 1955, by Modification 17 to the
Montana Federal-State agreement. The county has provided for the operation
of four cable ferries across the Missouri River. Prior to April 1962, the
individuals engaged to operate these ferries were paid $300 a month. The
county furnished gasoline and oil and made all major repairs to the ferry
and motor. IN addition, the county furnished a dwelling for the operator
at the ferry site and furnished all utilities except telephone. The
operators were required to provide ferry service to the public free of
charge from 7:00 a.m. to 7:00 p.m. daily. For crossings after these hours,
they were authorized to charge and retain a toll of $1.00. During this
period the operators were considered to be county employees. They were
members of the Public Employee's Retirement System and their wages were
reported for social security purposes.

Since April 1962, however, the services of these ferry operators have
been engaged pursuant to a written contract. Basically, the contract
provides that the county will pay the operator $350 a month to provide
ferry services from 7:00 a.m. to 7:00 p.m. daily free of charge to all
passengers. The county is to finish the operator with a dwelling and all
utilities except personal telephone. Major repairs to the ferry and motor
(which at all times were owned by the country) are to be made by the
county. The operator is required to finish all gasoline and oil.

Information obtained from several of the operators shows that the county
had first call on the operators' services to the extent that ferry had to
be operated from 7:00 a.m. to 7:00 p.m. daily, but the operators could
work for others if such work did not interfere with the operation of the
ferry; that the operators were given brief initial instructions in the
operation and maintenance of the ferry; that the only schedule they were
required to follow related to the hours of operation; that the operators
were required to make minor repairs and do all necessary maintenance work
on the ferries; and that the operators could neither quit nor be
discharged before the end of the contract term without liability. With
respect to this last point, it should be noted that under the contract the
county retained the right to suspend the operations of a ferry at any time
during which period the operators receive no compensation.

Information obtained from the county indicates that the ferry operators
ceased to be covered by the Public Employees' Retirement System of Montana
in April 1962. (With respect to this point, removal of a position covered
by social security as part of a retirement system does not terminate the
social security coverage.) Additionally, information was obtained from the
county to the effect that the county ceased to carry workmen's
compensation or public liability insurance effective with the month of
April 1962; prior to April 1962 the operators were directly supervised by
the county commissioners, whereas only "checks" were made thereafter to
see whether the terms of the contract were being observed; personal
services were required prior to April 1962, but not thereafter; and
reports were not operator might charge for after hours crossings was fixed
by each operator at his discretion. The contract provides for submittal of
disputes between passengers and operators to the county commissioners for
disposition; the county alleged, however, that such disputes were to be
settled by the operators.

The operators, on the other hand, indicated that the only significant
changes beginning April 1962 were that the county ceased to furnish
gasoline and oil for the ferry and that the operator's monetary
compensation was increased from $300 a month to $350 to cover the cost of
these items. They stated that before and after April 1962 they were
required to submit periodic reports of the number of crossings to the
county commissioners (one operator disagreed on this point, indicating he
was not required to file reports); and that a county commissioner or other
county employee regularly checked on the operation of the ferries. It also
appears from information obtained from the operators that disputes with
passengers were rare and were not, in practice, referred to the county
commissioners for settlement. The operators are of the view that the
county entered into the contractual arrangement to avoid paying overtime
and to overcome the practice of some operators of converting
county-supplied gasoline and oil to personal use.

The Commissioner found on review pursuant to the State's request that the
preponderance of evidence in file established that the only significant
change in the relationship after March 1962 was that the county ceased to
furnish gasoline and oil and instead increased the operator's remuneration
to cover the cost of those items. The Commissioner further found that
although the county may have intended to establish an independent
contractual relationship with the ferry operators, the actual changes in
the extent of control exercised over the activities of the operators did
not suffice to bring them within the concept of self- employment; and that
the terms of the contract itself, which specified the hours of work, the
days on which services were to be provided, as well as the duties of the
operators and the place where services were to be performed, established
an employment relationship. On the basis of these findings, the
Commissioner affirmed the assessments.

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